Genesis crypto lending unit files for bankruptcy in the US

Genesis crypto lending unit files for bankruptcy in the US

Jan 20 (Reuters) – Crypto firm Genesis’s lending unit filed for U.S. bankruptcy protection against creditors on Thursday, overturned by a market rout with companies like exchange FTX and the BlockFi lender.

Genesis Global Capital, one of the biggest crypto lenders, froze client redemptions on November 16 after FTX stunned the financial world with its bankruptcy, fueling fears that other companies could implode. The company is owned by venture capital firm Digital Currency Group (DCG).

Genesis’s lending unit said it had both assets and liabilities between $1 billion and $10 billion, and estimated it had more than 100,000 creditors on file with the U.S. Court of Justice. bankruptcies for the Southern District of New York.

Genesis Global Holdco, the parent group of Genesis Global Capital, has also filed for bankruptcy, along with another loan unit Genesis Asia Pacific.

Genesis Global Holdco said in a statement that it would consider a possible sale or capitalization transaction to pay creditors, and that it had $150 million in cash to support the restructuring.

He added that Genesis’ derivatives and spot trading, brokerage and custody businesses were not part of the bankruptcy process and would continue trading with customers.

Genesis’ bankruptcy filing is the latest in a cascade of crypto failures and heavy job cuts triggered by falling prices last year.

Genesis was already locked in a dispute with Gemini Trust Co, founded by identical twin cryptocurrency pioneers Cameron and Tyler Winklevoss, former US Olympic rowers. The two companies are fighting over a crypto lending product called Earn that they jointly offered.

The Winklevoss twins said Genesis owed more than $900 million to some 340,000 Earn investors. On January 10, Cameron Winklevoss called for the removal of Barry Silbert as chief executive of Digital Currency Group.

About an hour after the bankruptcy filing, Cameron Winklevoss tweeted that Silbert and Digital Currency Group continued to deny creditors a fair deal.

“Unless Barry (Silbert) and DCG come to their senses and make a fair offer to creditors, we will be taking legal action against Barry and DCG shortly,” Winklevoss said in his tweet thread.

Genesis and Gemini were charged by the United States Securities and Exchange Commission on January 12 with illegally selling securities to investors through the Earn program. Tyler Winklevoss called the complaint disappointing.

Genesis traded digital assets for financial institutions such as hedge funds and asset managers and had nearly $3 billion in total active loans at the end of the third quarter, up from $11.1 billion a year earlier. year earlier, according to its website.

Last year, Genesis issued $130.6 billion in crypto loans and traded $116.5 billion in assets, according to its website.

Its two main borrowers were Three Arrows Capital, a Singapore-based crypto hedge fund, and Alameda Research, a trading company with close ties to FTX, a source told Reuters. Both are in bankruptcy proceedings.

Three Arrows’ debt to Genesis was assumed by its parent company Digital Currency Group (DCG), which then filed a lawsuit against Three Arrows. DCG’s portfolio companies also include crypto asset manager Grayscale and news service CoinDesk.

Crypto lenders, which acted as de facto banks, have exploded during the pandemic. But unlike traditional banks, they are not required to hold capital buffers. Earlier this year, a lack of collateral forced some lenders – and their customers – to take heavy losses.

Reporting by Tom Hals in Wilmington, Delaware and Akanksha Khushi; Editing by Lananh Nguyen, Clarence Fernandez and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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